India's economic growth accelerated to 8.2 per cent year-on-year in the July-September period, boosted by strong consumer spending and a front-loading of production ahead of local festivals and punitive US tariffs.
Economists polled by Reuters had forecast a 7.3 per cent expansion for the quarter ended September, during which the US imposed an additional 25 per cent punitive tariff on Indian exports, raising the total levy to 50 per cent.
The gross domestic product grew by 7.8 per cent in the previous quarter. Private consumer spending, which accounts for around 57 per cent of GDP, rose 7.9 per cent year-on-year in July-September, compared with a 7 per cent rise a quarter ago, the data released on Friday showed.
To counter subdued external demand and mitigate the effects of US tariffs tied to its Russian oil purchases, India introduced tax cuts on mass consumption items which kicked in at the end of September.
"The blockbuster GDP growth has been led by front-loading of exports," said Garima Kapoor, economist, institutional equities, at Elara Securities in Mumbai.
"With today's print, full-year FY26 GDP growth will now see an upside and will be close to 7.5 per cent, way above the (central bank's) and government's estimate," Kapoor said.
Government expects sustained growth
Economists said stockpiling for the festive season as well as expedited exports ahead of the 50 per cent tariff deadline on August 27 might have contributed to the quarterly growth figures.
Manufacturing output rose 9.1 per cent in the quarter ending in September from a year earlier against growth of 7.7 per cent a quarter ago, while construction expanded 7.2 per cent year-on-year from 7.6 per cent a quarter ago.
Government spending decelerated, declining 2.7 per cent year-on-year in the three-month period compared with growth of 7.4 per cent in the previous quarter.
The government expects strong demand, firm public spending and easing inflation to help India weather trade uncertainties and sustain growth through the rest of the 2025/26 financial year.
Retail inflation in October slumped to a record low of 0.25 per cent in October, raising chances of an interest rate cut by the Reserve Bank of India in its next review in December.
Nominal growth, which includes inflation, was 8.7 per cent in July-September as against 8.8 per cent in the quarter earlier, weighing on corporate profits and tax collection.
More rare cuts possible
Gross value added, considered by economists as a more accurate measure of underlying economic activity, grew 8.1 per cent year-on-year in July-September from 7.6 per cent in the three months to June. GVA excludes indirect taxes and government subsidy payouts, which tend to be volatile.
The agriculture sector grew 3.5 per cent year-on-year compared with an increase of 3.7 per cent a quarter ago.
Domestic tax cuts and the RBI's cumulative rate cuts of 100 basis points this year will help boost private investment and economic growth, according to the central bank. The central bank estimates the economy will grow 6.8 per cent in the financial year ending March.
Earlier this week, RBI Governor Sanjay Malhotra said there was scope to further reduce interest rates, ahead of the monetary policy meeting scheduled in December.